Company Presentation Star Conference London October 2007 1
2 Company Overview
Landi Renzo World Leader in CNG and LPG Alternative Fuel Systems Integrated Alternative Systems Energy Producer Focus Alternative Company Main Energy Products Focus Electronic Control Unit Switch Injector Rail Electronic Control Unit Injector Rail Switch Filter Regulator Regulator Ready-to-go systems marketed through: Car manufacturers (OEMs) - ca. 50 Aftermarket through distributors and installers - ca. 750 3
.Over 50 Years of Experience and Innovation 1954 Renzo Landi, father of the current CEO, founds Officine Meccaniche Renzo Landi, producing systems for 1960s 1963 64 1965 1968 1978 1980s conversion of vehicles to run on gas Sells products directly to installers and establishes a sales network in Italy International expansion as products are exported to Europe and Asia, and subsequently to South America Begins to outsource manufacturing, but retains R&D activities and assembly Introduction of Renzomatic, a pressure reducer for LPG conversion. First product in the market to electronically control the idle speed condition Corporate reorganisation as Landi Renzo S.r.L, which controls the company s subsidiaries, is formed Further evolution of business model as company uses distributors to deal with end-market installers Introduction of TN1, the first pressure reducer operated electronically 1990s Acquired 70% of Eurogas Holding BV in 1995, a Dutch company operating in the same sector. Then in 1999 it formed a Polish subsidiary, Landi Renzo Polska 2001 2003 2005 2006 2007 Acquisition of MED S.p.A., a specialist in gas valves and car alarm systems to improve electronic capabilities After receiving ISO 9001 certification (1996), the Company was the first in the industry to obtain ISO/TS 16949 certification for automotive high quality standards Production facility opened in Brazil Subsidiary opened in China Subsidiary opened in Pakistan (includes production facility) Planned opening of production facility in Iran 4
Global Presence with Local Footprint Italy Netherlands Poland Picture Picture Picture Brazil Picture China Picture Italy (MED) Iran Pakistan Picture Picture Picture Assembly, Testing and Packaging Distribution Product Presence 5
High Growth Market Increasing pressure to use alternative fuels Global LPG and CNG Unit Sales (2004 2012E) CAGR: 18.2% 7,9m LPG and CNG are cleaner and cheaper CAGR: 9.9% 2,4m 2,6m 2,9m Proven technology broadly available today 2004 2005 2006 2007E 2008E 2009E 2010E 2011E 2012E The gaseous fuel systems market has experienced strong tailwinds and its growth look set to improve in the years to 2012 6 Source: Frost & Sullivan
LPG and CNG are Cleaner and Cheaper Greenhouse Alternative Gas and Energy Particulate Focus Emissions Alternative Cost to Energy Run 10km Focus 100% 1.23 75% 62% 0.79 0,78 52% 40% 0.35 Diesel Gasoline Ethanol LPG CNG Gasoline Diesel LPG CNG 7
LPG and CNG are Broadly Available Today Low Emissions Alternative Energy Focus Gas (CNG, LPG) Biodiesel / Bioethanol (1 st and 2 nd generation) Hydrogen / Fuel Cell Hybrid Technology Availability of Technology Infrastructure Opportunity Cost Long Term Potential 8
World Leader and Top 3 Player in All Key Markets World Number Alternative 1 in Energy a Fragmented Focus Market Presence Alternative in the Energy Key Markets Focus Landi ~23% Country Position Market Share Market Size (% of total) Italy #1 35% 7.5% Germany #1 (CNG) #2 (LPG) na 12% 4.0% Others ~ 77% Brazil #3 20% 8.9% Pakistan #1 49% 13.2% Combined market share of top 3 around 50% Large number of smaller players Compete on a local level Less technologically advanced products Focus on components, not systems Russia #2 18% 12.1% GLOBAL #1 ~23% 100% 9 Source: Frost & Sullivan. Based on 2006A units sold
Strong Relationships with Major OEMs LCVs Cars Developed Markets 10 Group Emerging Markets Group
Strong Positioning High Tech Products Landi s positioning in the high value add segments of the market gives a significant competitive advantage Global Reach BRC Lovato OMVL BRC Tartarini Components Prins System Low tech products Lovato Bigas Tartarini OMVL Tartarini Stargas 11 Prins BRC Stargas Bigas LPG Lovato CNG
Lean Business Model In-House R&D Production of High Value Added Components (Injection Systems) Testing / Quality, Packaging Sales & Marketing Third Parties Production of Basic Components Assembly Logistics 12
13 Financials
Growth Combined With Increasing Margins Alternative Revenues Energy Focus Alternative EBITDA Energy Focus Alternative Net Income Energy Focus CAGR: +47% CAGR: +84% CAGR: +127% 50.3% 43.1% 21.0% 21.9% 12.1% 12.0% 139 13.9% 30,3 16,7 65 92 19,4 5.0% 11,1 32.1% 8,9 3,2 2004 2005 2006 m % Growth Notes: 2004 ITA GAAP, 2005 and 2006 IFRS 2004 2005 2006 m % Margin 2004 2005 2006 m % Margin 14
Well Diversified and Balanced Revenues Mix Revenues by Segment Total 64.5 92.3 138.7 Revenues by Geography Total 64.5 92.3 138.7 3.0% 2.7% 6.4% 5.6% 4.1% 54.6% 2.5% 6.2% 5.8% 34.2% 5.1% 50.3% 3.2% 6.1% 6.9% 29.2% 25.4% 51.6% 27.1% 29.5% 43.3% 45.7% 42.4% 30.2% 26.5% 26.9% 25.7% 2004 2005 2006 LPG ( m) CNG ( m) Other ( m) Notes: 2004 ITA GAAP, 2005 and 2006 IFRS 2004 2005 2006 Italy ( m) Europe (ex Italy) ( m) South-West Asia ( m) Rest of Asia ( m) America ( m) Other ( m) 15
Superior Operating and Net Income Margins EBITDA Net Income CAGR: +84% CAGR: +127% 21,0% 21,9% 12,1% 12,0% 13,9% 30,3 16,7 19,4 5,0% 11,1 8,9 3,2 2004 2005 2006 m % Margin 2004 2005 2006 m % Margin Notes: 2004 ITA GAAP, 2005 and 2006 IFRS 16
Low Net Working Capital Requirements Alternative Net Working Energy Capital Focus Alternative Days Energy Focus 28,5% Inventories 96 83 72 2004 2005 2006 17,2% 18,6% 25,8 Trade Receivables 80 69 56 18,4 15,9 2004 2005 2006 2004 2005 2006 m % Revenues Notes: 2004 ITA GAAP, 2005 and 2006 IFRS Trade Payables 122 130 95 2004 2005 2006 17
Limited Capex Requirements and Strong Return on Capital Employed Total Capex ROCE 8,4% 7,2% 3,8% 10,0 41,7 47,9 5,4 3,5 14,5 2004 2005 2006 m % of Revenues 2004 2005 2006 % Return on Capital Employed Notes: 2004 ITA GAAP, 2005 and 2006 IFRS 18
19 1H 2007 results
1H 2007 Highlights 4.4% revenues growth to 74.7m ( 71.6m in 1H 2006) 10.3% Ebitda growth to 17.1m ( 15.5m in 1H 2006) 22.8% Ebitda margin (21.6% in 1H 2006) 47.3m Net Financial Position Production started in Pakistan subsidiary in July Eur ml 1H 2007 1H 2006 YoY Growth Revenues 74,7 100,0% 71,6 100,0% 4,4% EBITDA Ebitda 17,1 22,8% 15,5 21,6% 10,3% EBIT Ebit 15,2 20,4% 14,1 19,7% 8,2% Note: IFRS. 20
Revenues Breakdown Revenues by Segment Revenues by Geography TOTAL 71.6 2.6% + 4.4 % 74.7 3.2% TOTAL 71.6 74.7 + 4.4 % 2.1% 6.2% 3.2% 3.5% 5.5% 6.2% 50.6% 44.2% 32.4% 33.1% 21.6% 24.4% 52.6% 46.8% 33.7% 27.9% 1H06 1H07 1H06 1H07 LPG ( m) CNG ( m) Other ( m) Italy ( m) South-West Asia ( m) America ( m) Europe (ex Italy) ( m) Rest of Asia ( m) Other ( m) 21
Lean Cost Structure 1H 2007 Cost Structure Reconciliation to Net Income - % of Revenues 45.8% 100% 13.5% 8.8% 9.0% 0.1% 2.4% 0.5% 40.7% 22.8% 20.4% +19.9% 22 7.5% 12.4% Taxes Net Income Net Income Revenues Revenues Consumption External Manufacturing Gross Profit Gross Profit Sundry Services Personnel Other (*) EBITDA EBITDA D&A EBIT EBIT Net Financial Interest PBT PBT (*) net of other income
1H 2007 Ebitda and Ebit +10,3% increase in EBITDA Alternative +8,2% increase Energy in Focus EBIT + 10.3 % + 8.2 % 22.8% 20.4% 21.6% 19.7% 15,5 17,1 14,1 15,2 1H 2006 1H 2007 m % Margin 1H 2006 1H 2007 m % Margin 23
1H 2007: Strong control on working capital and financial position Alternative Net Working Energy Capital Focus Net working capital increased mainly due to inventory and receivables related to listing Alternative Net Financial Energy Position Focus Net financial position reflects the proceeds of the IPO 18,6% 18,2% 21,4% 30,3 25,8 26,2 25.8 26.2 47,3 dic-06 mar-07 giu-07 dic-06 mar-07 giu-07 m % of revenues -7,4-4,2 m Note: IFRS. 24
25 2007 strategic outlook
A clear path ahead DRIVING TOWARDS A CLEANER ENVIRONMENT: A HEALTHIER FUTURE Remain at the Forefront of Industry Innovation by Continuing Strong Investment in Research and Development Continue to Adapt Business Model to Further Improve Efficiency Exploit business opportunities in new and existing markets 26
A clear revenue growth roadmap for 2H 2007 PRINCIPAL JUDGED GROWING DRIVERS Increase of revenues in South West Asia driven by market expansion Increase of revenues in South America driven by market expansion in Brazil, Colombia and Peru and increased penetration in that area through new distributors introduction in AM segment Increase of revenues in West Europe driven by market expansion in Germany and increased penetration in that area through OEM partnership Increase of revenues in Rest of Asia driven by increased market penetration in Indian LPG segment and Chinese OEM segment 27
A clear EBITDA roadmap for 2H 2007 Increasing in Sales Revenues will be larger than related increase on fixed cost Change on Geographical mix of revenues versus 1H largely compensated by manufacturing cost reduction due to: Pakistani manufacturing facilities start up (July 2007) Iranian manufacturing facilities start up (October 2007) Continuous cost reduction mainly focused on electronic components and outsourced activities 28
Acquisition Approach Landi Renzo decision model: Line of external growth evaluated Increase of perimeter of supply Expansion in new market segment Increase penetration in existing market segment LR Planning to apply the model Short list Evaluation Analysis of potential acquisition Target Price Definition September 2007 End 2007/1Q 2008 29
investorrelationslandi.it@landi.it +39 0522 9433 www.landi.it 30
31 Annexes
Revenues Breakdown Revenues Breakdown for Segment and Region (EUR ml) Eur ml 1H 2007 1H 2006 Growth 2006 2005 Segment LPG 39.3 52.6% 33.5 46.8% 17.4% 58.9 42.5% 42.1 45.6% CNG 33.0 44.2% 36.2 50.6% -8.8% 75.7 54.6% 46.4 50.3% Other 2.4 3.2% 1.9 2.6% 27.0% 4.1 3.0% 3.8 4.1% Revenues 74.7 100.0% 71.6 100.0% 4.4% 138.7 100.0% 92.3 100.0% Region Italy 25.2 33.7% 20.0 27.9% 26.2% 35.6 25.7% 24.8 26.9% Europe (ex Italy) 16.1 21.6% 17.5 24.4% -7.5% 35.3 25.4% 27.2 29.5% SW Asia 24.2 32.4% 23.7 33.1% 2.2% 47.4 34.2% 27.0 29.2% Rest of Asia 4.1 5.5% 4.5 6.2% -7.6% 7.8 5.6% 5.3 5.8% America 2.6 3.5% 4.5 6.2% -41.6% 8.9 6.4% 5.7 6.2% Other 2.4 3.2% 1.5 2.1% 59.0% 3.7 2.7% 2.3 2.5% Revenues 74.7 100.0% 71.6 100.0% 4.4% 138.7 100.0% 92.3 100.0% 32
Current Ownership Kairos Partners SGR S.p.A. 2.03% UBS Equity Fund Management Co SA 2.31% Gireimm S.r.l. 4.44% Free Float 36.55% Girefin S.p.A. 54.67% 33
Government Regulation and Legislative Overview Summary of Key Regions and Countries European Union Italy India Key Regulatory and Legislative Alternative Mechanisms Energy Focus Driving Gas Vehicle Demand Lower taxation of gas vs. petrol and diesel Emission targets and caps (Kyoto Protocol and regional targets) Forced conversions, e.g. for fleets Tightening emissions standards for all vehicles (Euro 5 in 2009) Proposed 2012 CO2 emissions target at 120 g/km Fuel tax guaranteed until 2018 for vehicles that run on gaseous fuel Government offers cash incentive of 1,500 for new vehicles and 650 for aftermarket conversions LPG and CNG users are exempted from road tax. Further regional incentives exist Mandatory conversion of all public vehicles in Delhi and Bombay already in force Pakistan Iran Brazil Australia Russia Mandatory conversion of local public transport and all taxis to CNG by 2008 Government offering 50% reimbursement to OEMs for ensuring conversion of cars Announced program of rationing petrol use State Government of Rio de Janeiro started granting tax incentives for individuals or governments who converted their cars to CNG in 2005 Government offers grants of AUS$ 2,000 for conversion and AUS$1,000 for OE purchase Working in conjunction with Gazprom to develop program to use CNG in public transport CNG price is regulated by the government and can not be higher than 50% of petrol 34
LPG and CNG are Broadly Available Today Service Stations Networks and Circulating LPG Vehicles (Top 10 by Number of Vehicles) Service Stations Networks and Circulating CNG Vehicles (Top 10 by Number of Vehicles) Country Network LPG vehicles Country Network CNG vehicles Poland 5,900 2,000,000 Argentina 1,400 1,459,236 Turkey 4,500 1,500,000 Brazil 1,410 1,357,239 Italy 2,100 1,100,000 Pakistan 1,230 1,300,000 Netherlands 2,050 320,000 Italy 558 410,000 Czeck Rep. 400 170,000 India 321 334,658 Lituania 830 170,000 Iran 179 229,607 France 1,830 160,000 China 355 127,100 UK 1,278 128,000 Colombia 90 100,000 Benelux 600 71,000 Egypt 99 67,266 Germany 1,000 65,000 Ukraine 147 67,000 Source: Assogasliquidi. Source: International Association of Natural Gas Vehicles. 35
36 CNG Prices Proven to be Cheaper and less Volatile than Petrol and Ethanol: the Brazilian Case Cost Per Unit in Brazilian Real 3,0 1,074 1,075 1,075 1,073 1,069 1,091 1,100 1,092 1,095 1,086 1,081 1,085 1,088 1,091 1,094 1,089 1,088 1,000 1,121 1,120 1,194 1,194 1,206 1,209 1,216 1,247 1,247 1,262 1,257 1,271 1,244 1,273 1,263 1,205 1,170 1,105 1,032 1,048 1,136 1,162 1,262 1,273 1,347 1,408 1,437 1,424 1,412 1,413 1,411 1,332 1,215 1,251 1,272 1,405 1,449 1,496 1,549 1,650 1,624 1,596 1,628 1,576 1,813 2,007 2,003 1,991 1,972 1,983 2,062 1,981 2,107 2,000 2,000 2,127 2,124 2,161 2,191 2,271 2,268 2,262 2,263 2,267 2,253 2,226 2,232 2,239 2,442 2,447 2,449 2,457 2,477 2,589 2,589 2,583 2,574 2,545 2,544 2,548 2,540 2,5 2,0 1,5 1,0 Delta 49% 20% Price Equivalent (Brasilian Real) 0,5 gen-04 feb-04 mar-04 apr-04 mag-04 giu-04 lug-04 ago-04 set-04 ott-04 nov-04 dic-04 gen-05 feb-05 mar-05 apr-05 mag-05 giu-05 lug-05 ago-05 set-05 ott-05 nov-05 dic-05 gen-06 feb-06 mar-06 apr-06 mag-06 giu-06 lug-06 ago-06 set-06 Natural Gas Ethanol Petrol There are a greater number of variables that affect the price of ethanol compared to natural gas, which leads to higher underlying price volatility. Climatic fluctuations and supply / demand dynamics for crops are at the root of this volatility. Source: Petrobras
Disclaimer This presentation has been prepared by Landi Renzo S.p.A. for information purposes only and for use in presentations of the Group s results and strategies. For further details on the Landi Renzo Group, reference should be made to publicly available information, including the Quarterly Reports and the Annual Reports. Statements contained in this presentation, particularly the ones regarding any Landi Renzo possible or assumed future performance, are or may be forward looking statements and in this respect they involve some risks and uncertainties. Any reference to past performance of the Landi Renzo shall not be taken as an indication of future performance. This document does not constitute an offer or invitation to purchase or subscribe for any shares and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. By attending the presentation you agree to be bound by the foregoing terms. 37